2019 (12) TMI 1189 - AT - Income Tax

Reopening of assessment u/s 147 - addition u/s 68 - HELD THAT - AO has followed the due procedure of law and also had specific information in his possession, received from the DIT(Inv.) which indicated that certain amounts had been received in the form of bogus share capital/premium/loan from Sh. Surinder Kumar Jain who were entry operators. AO has elaborately discussed in the assessment order as to how the amounts received in the form of share capital/share premium etc, had not been properly examined at the time of earlier assessment and also how this information was fresh information and specific in nature, which clearly indicated that there was omission/failure on the part of the assessee to disclose fully and truly all material facts necessary for assessment. AO has also relied upon various judicial pronouncements stated in the assessment order to highlight such omission or failure to disclosed fully and truly all material facts what clearly justified reopening of the assessment beyond four years. In the present case there was enough evidence and justification with the AO to reopen the assessment beyond period of four years. It has been widely held by the Courts that it is not necessary to prove beyond doubt that income has escaped assessment and it is sufficient that the AO has recorded his reasons and followed the due procedure of law for reopening of the assessment. In .view of factual matrix of the present case, I do not find any reason to interfere with the findings of the AO that this was a fit case for reopening of the assessment and accordingly the contentions and Grounds of the appellant are dismissed. Addition on account of share capital and share premium - In the factual matrix of the present case, where entries had been taken from paper companies and Credit worthiness of the Parties as well as the genuineness of the transaction had not been discharged by the appellant, there was no justification to accept the contentions of the AR Of the appellant that the additions were not justified. Accordingly, after careful consideration of the facts of 'the present case, there is no material or submissions provided by the AR of the appellant, which calls for any interference In the decisions of the AO. Accordingly, this addition of ₹ 90 Lacs made by the AO is upheld. These Grounds are therefore dismissed.

Summary

Issues Involved:
1. Legality of reopening the assessment.
2. Addition of ?90,00,000 under Section 68 of the Income Tax Act, 1961.

Issue-wise Detailed Analysis:

1. Legality of Reopening the Assessment:

Facts and Arguments:
- The assessee argued that the reopening of the assessment was bad in law, ab initio void, and without jurisdiction, as the original assessment was completed under Section 143(3) and the notice under Section 148 was issued after four years from the end of the relevant assessment year.
- The assessee contended that there was no failure on its part to disclose fully and truly all material facts necessary for assessment.
- The Revenue, on the other hand, relied on specific information from the Director of Income Tax (Investigation) indicating that the assessee had obtained accommodation entries amounting to ?90,00,000 during the financial year 2005-06 from entities controlled by Surender Kumar Jain Group, which were found to be bogus.

Findings:
- The Assessing Officer (AO) had received new tangible material from the Investigation Wing, which was specific and reliable in nature, justifying the reopening of the assessment.
- The AO followed due procedure and recorded reasons for the formation of belief that income had escaped assessment due to the assessee's failure to disclose fully and truly all material facts.
- The CIT(A) upheld the reopening of the assessment, citing various judicial pronouncements supporting the AO's action, including the decisions in Phool Chand Bajrang Lal (203 ITR 456) and AGR Investments Ltd. (303 ITR 146).

Conclusion:
- The ITAT found no material to take a different view from the CIT(A) and upheld the reopening of the assessment, dismissing the assessee's appeal on this ground.

2. Addition of ?90,00,000 under Section 68:

Facts and Arguments:
- The AO made an addition of ?90,00,000 under Section 68, treating the share capital and share premium received by the assessee from four entities as unexplained cash credits.
- The AO relied on seized documents and statements from Surender Kumar Jain and Virender Kumar Jain, which indicated that the entities providing the share capital were paper companies controlled by the Jain Group, engaged in providing accommodation entries.
- The assessee argued that it had provided all necessary documents to prove the identity, genuineness, and creditworthiness of the shareholders, including share application forms, allotment letters, certificates of incorporation, and audited financial statements.
- The assessee also contended that the transactions were conducted through proper banking channels and that the shareholders were existing income tax assessees.

Findings:
- The AO's investigation revealed that the entities providing the share capital had characteristics typical of accommodation entry providers, such as large shareholder funds with negligible income and operating from common addresses.
- The CIT(A) upheld the addition, finding that the assessee had failed to discharge the onus of proving the genuineness of the transactions and the creditworthiness of the shareholders.
- The CIT(A) relied on various judicial pronouncements, including CIT vs. Nova Promoters & Finlease (342 ITR 169) and CIT vs. Independent Media (210 Taxmann 14), to support the addition under Section 68.

Conclusion:
- The ITAT agreed with the CIT(A) that the assessee had not provided sufficient material to prove the genuineness of the transactions and the creditworthiness of the shareholders.
- The ITAT upheld the addition of ?90,00,000 under Section 68, dismissing the assessee's appeal on this ground.

Final Decision:
- The ITAT dismissed the appeal filed by the assessee, upholding the reopening of the assessment and the addition of ?90,00,000 under Section 68.
- The ITAT clarified that the assessee could approach the ITAT for restoration of the appeal in accordance with the Proviso to Rule 24 of the Income Tax (Appellate Tribunal) Rules, 1963, if desired.